Great Places to Work®: Resilience in Times of Crisis

Abstract

We study the resilience of the “100 Best Companies to Work for in America” in times of financial crises by analyzing their long-term financial performance. Apart from implementing methods that tackle the statistical problems of stock returns, we use a conditional model to measure financial performance in periods of market growth (bull markets) and market downturn (bear markets). Our results sustain the proposition that best companies to work for are resilient in times of crisis since neither their financial performance nor their systematic risk are affected during bear markets: top companies continue to outperform the market during periods of crises, and the performance of lower-ranked great workplaces does not deteriorate. Moreover, we find that previous studies were overestimating performance, and only great workplaces on the top half of the rankings exhibit positive excessive returns. We conclude that, in general, this award has an impact on these firms’ reputations that allows investors to acknowledge the value of outstanding employee relations and correctly incorporate it into stock prices. They fail to do so for the top ranking companies, however, reinforcing the notion that outstanding people management entails intrinsic benefits with financial value that are difficult to discern due to its intangible nature.

Keywords: best-practice HRM, best employer awards, financial performance, bull and bear markets, conditional models